Financial problems when moving abroad

MONEY TALK By David Elms Chief executive, Unbiased.co.uk

If the weather in Britain has you dreaming of moving to warmer climates, remember to take time to plan your finances before packing up and moving abroad.

Whether you are leaving for an extended trip or permanent move, it is essential to organise your affairs to avoid a financial headache.

Here are some of the main issues and pitfalls you may encounter.

Currency risk

Wherever you move, you must remember that your financial future is linked to the local currency.

Experts often urge people moving from the UK to other countries to transfer some assets and savings into the currency of the new country.

This is to protect your money from any currency movements.

Interest or growth earned can be wiped out if exchange rates move against you.

Take advice to decide if this is the best route for you.

If you are transferring regular sums abroad from a British bank account, such as a pension, you can take advantage of a specialist currency exchange to avoid exchange rate movement.

Many of these companies allow you to fix an exchange rate for a specified period of time.

Banking and pensions

How easy will it be to access your British bank account while you are abroad?

If you become non-resident in the UK for tax purposes, income will be liable to tax in your new country

It may make sense to make sure you can bank online.

Also remember that if you plan to stay for some time, you will need to open a local bank account in the currency of the country you live in to have any local wages paid into, and pay bills from.

When it comes to retirement, which country you are in could make a big difference to your pension income - an issue many do not consider when moving to sunnier shores.

You are eligible to receive your UK state pension and occupational pension in full if you move to another country within the European Union.

Also, your state pension will continue to increase in line with inflation, which is not the case for people who retire to countries such as the United States, South Africa and New Zealand.

Taxation

The taxation of expats can be a complex issue, but generally you will be taxed wherever you are deemed resident.

You will usually continue to pay UK taxes as long as HM Revenue & Customs considers you to be a UK resident.

Also, you will remain liable for British taxes if you spend 183 days or more in the UK, or your visits to this country average 91 days or more a year over four years.

If you become non-resident in the UK for tax purposes, income will be liable to tax in your new country.

You will not be taxed twice on the same income if there is a double taxation treaty in place with the UK and the country you are in, so remember to check this before you go.

For example, treaties are in place with Spain, Italy, France and Portugal.

As a UK resident, before investing in offshore accounts to try to reduce your tax burden, it is worth taking financial advice to see if it is worthwhile.

Last year HMRC offered an amnesty to thousands of UK investors who have money in offshore accounts.

It gave them until 22nd June 2007 to reveal any income tax owed on interest earned in overseas accounts in a drive to claim more than �1 billion in revenue.

By 26th November 2007 they must have paid the Revenue the full amount owing, including interest.

If they did this, they were charged a penalty of just 10 per cent of the tax owed.

Usually, tax evaders face penalties of up to 100 per cent.

Wills and inheritance tax

Different countries deal with death taxes and wills in different ways and it pays to find out how your estate will be treated when you die.

The NHS is unique to the UK and in many parts of the world you will have to pay for any medical or dental treatment

In Spain and France, for example, your will can be overridden to make you provide for your children rather than giving your property to your spouse outright.

You will need to make a new will to comply with local law if you retire abroad, an important issue which may easily slip off the to-do list.

But you will also need a UK will if you have assets or still own property in Britain.

Health insurance

You will need to register with the social security system in the country you are moving to (if there is one) so you can benefit from its healthcare services.

Remember that the NHS is unique to the UK and in many parts of the world you will have to pay for any medical or dental treatment you receive.

It may be that you will need to find a financial adviser in the country you are moving to, particularly if you are buying a property, who can speak your language and explain to you the local tax and rules surrounding financial transactions.

With an array of financial issues and potential pitfalls to deal with, it is worth taking expert advice.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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